Overnight, Trump announces new tariffs on Canada. Prime Minister Carney announces aid to companies and promises to diversify, but the two economies are too integrated for a definitive break.
There appears to be no end to the trade disputes between the United States and Canada. To the duties imposed by the American President Donald Trump last August 22nd they were followed by the countermeasures adopted by Canada on September 8th.
President Trump’s new escalation arrived today, which he announced last night having signed an executive order that further escalates the trade war among its North American neighbors.
New round of duties
With the new executive order, The United States will ban the importation of most Canadian alcoholic beverages starting September 29thincluding beer, wine, whiskey, vodka and other spirits. In addition to this, some dairy products (such as whey) and the import of motorcycles are affected.
It doesn’t end here, because at the same time, from 15 September, new additional duties of 50% are triggered on a series of other Canadian goodsincluding mattresses, golf carts, motorboats, some cheeses and other artifacts.
Trump also ordered Canadian-origin products to be excluded from long-term federal GSA contracts (General Services AdministrationtheUS government agency that manages federal government purchasing and contracting). We are talking about over 50 billion dollars per year.
Draconian measures, which however do not seem, for the moment, to have undermined the will of Canadian Prime Minister Mark Carney from continuing to respond blow for blow.
Carney’s response
Canadian Prime Minister Mark Carney responded with a speech to the nation in which he defended Canada’s response, describing last night’s counter-tariffs as a “inevitable measure” to protect Canadian workers.
Canada has “everything it needs to reorient itself and prosper,” Carney said, while acknowledging that the turnaround will come at a cost, but less than that of inaction.
The prime minister harshly criticized the White House’s trade strategy, defining American conduct as a violation of the pacts and declaring that “Canada will not be bullied.”
Carney also announced a CAD 5.42 billion economic aid packageallocated by the federal government to support the industrial and agricultural sectors most affected by US sanctions.
What happens now
The ongoing trade war between North American neighbors could have important consequences, which however must be placed in context.
If it is true that Ottawa now seems headed towards the economic diversification from the southern neighbor, it should not however be thought that the two countries, until now substantially “symbiotic” from an economic point of view, will cease their economic cooperation.
Carney stated that it will not respond to the latest round of tariffs imposed by Trumpbut that Canada will nevertheless immediately accelerate plans for diversify its economyaiming to reduce the historic trade dependence on the United States and forging stronger ties with other international partners (such as the European Union and the countries of the Asia-Pacific area).
The task, on the other hand, will be arduous. Trade between the United States and Canada is historic one of the largest and most integrated in the worldwith an overall value of around 800-900 billion dollars per year (equal to almost $2.4 billion in goods cross the border every single day).
About the 72-75% of all Canadian exports is headed towards the United States, mainly crude oil, electricity, construction lumber, aluminum and iron; it is therefore easy to understand how the current trade war represents an unprecedented strategic challenge for Ottawa’s economy.
However, the path seems to be marked, at least until the White House sits tycoon. Bilateral relations between the United States and Canada are at an all-time lowjust think of Trump’s repeated comments on the annexation of Canada; it therefore seems difficult to imagine that the situation could change between now and the next two years.
However, talking about a clear and definitive break is clearly excessive. The two economies are too integrated, what is certain, however, is that relations are unlikely to return to previous levels.
